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Selection of Static Supply Portfolio

In: Supply Chain Disruption Management

Author

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  • Tadeusz Sawik

    (AGH University of Science and Technology
    Reykjavik University)

Abstract

This paper deals with the optimal selection of supply portfolio in a make-to-order environment in the presence of supply chain disruption risks. Given a set of customer orders for products, the decision maker needs to decide from which supplier to purchase custom parts required for each customer order to minimize total cost and mitigate the impact of disruption risks. The selection of suppliers and allocation of orders is based on price and quality of purchased parts and reliability of delivery. The two types of disruption scenarios are considered: scenarios with independent local disruptions of each supplier and scenarios with local and global disruptions that may result in all suppliers disruption simultaneously. The problem is formulated as a single- or bi-objective mixed integer program and a value-at-risk and conditional value-at-risk approach is applied to control the risk of supply disruptions. The proposed portfolio approach is capable of optimizing the supply portfolio by calculating value-at-risk of cost per part and minimizing expected worst-case cost per part simultaneously. Numerical examples are presented and some computational results are reported. The major managerial insights are provided at the end of this chapter.

Suggested Citation

  • Tadeusz Sawik, 2020. "Selection of Static Supply Portfolio," International Series in Operations Research & Management Science, in: Supply Chain Disruption Management, edition 2, chapter 0, pages 19-45, Springer.
    • Handle: RePEc:spr:isochp:978-3-030-44814-1_2
    DOI: 10.1007/978-3-030-44814-1_2
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